BOND FUNDS
Firstar Stellar Insured Tax-Free Bond Fund
Firstar Stellar U.S. Government Income Fund
Firstar Stellar Strategic Income Fund
Combined Semi-annual Report
May 31, 1999
(FIRSTAR STELLAR FUNDS LOGO)
PRESIDENT'S MESSAGE
Dear Shareholder:
On behalf of the Firstar Stellar Funds, thank you for your continued confidence
and for giving us the opportunity to help you achieve your financial goals.
From late 1998 through May of 1999, financial markets experienced substantial
short-term volatility. The fixed-income markets particularly were hurt in the
latter part of this six month period by rising interest rates. The investment
strategies employed by the Firstar Stellar Funds are designed to provide you
steady performance through up and down markets.
On the following pages you will find the results for the period from December 1,
1998 through May 31, 1999 for the fixed-income funds, as well as questions and
answers from our portfolio managers regarding fund performance. I hope you will
take the time to read this important information.
FIRSTAR STELLAR INSURED TAX-FREE BOND FUND
This Fund invests primarily in high-grade municipal bonds that are insured as to
repayment of principal.*<F1> As interest rates for municipals did not increase
as much as for taxable bonds, this Fund produced a return of 0.46% or (4.02)%
adjusted for the sales charge, for the six month period ended May 31, 1999.
**<F2>This Fund is a very good investment for individuals who are seeking
tax-free income through high quality investments.
FIRSTAR STELLAR STRATEGIC INCOME FUND
The Strategic Income Fund provided a steady return of income to investors
throughout the six month period by maintaining a stable dividend during a period
of fluctuating interest rates. This was accomplished through the unique
combination of investments held by this Fund. Total return was (0.90)% or
(5.68)% adjusted for the maximum contingent deferred sales charge, for the six
month period ended May 31, 1999.**<F2> For a more complete description of the
holdings of this unique Fund, please read the following material.
FIRSTAR STELLAR U.S. GOVERNMENT INCOME FUND
Fears of inflation forced interest rates higher during the six month period. In
this environment, the U.S. Government Income Fund was helped by its emphasis on
quality. The Fund produced a total return for the six month period ended May
31, 1999 of (2.16)% or (5.59)% adjusted for the sales charge, for A Shares and
(2.18)% or (6.94)% adjusted for the maximum contingent deferred sales charge,
for B Shares while continuing to produce income for its shareholders.**<F2>
ThisFund remains a solid choice for those seeking quality taxable income
performance.
We thank you for using the Firstar Stellar Funds to meet your investment needs
and we look forward to providing solid performance and service to you in the
future.
Sincerely,
/s/Daniel B. Benhase
Daniel B. Benhase
President
July 15, 1999
*<F1>Income may be subject to the federal alternative minimum tax and state
and local taxes.
**<F2>Performance quoted represents past performance and is not indicative
of future results. Investment return and principal value will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
INVESTMENT REVIEWS
FIRSTAR STELLAR INSURED TAX-FREE BOND FUND
Q The Stellar Insured Tax-Free Bond Fund generated strong returns in 1998.
What has impacted its performance for the first five months of 1999?
A We have worked hard this year to increase the Fund's allocation to
noncallable, intermediate maturity bonds with slightly higher (at least 6%)
coupons. This transition, although not yet complete, has helped the Fund
weather the increase in market yields thus far in 1999. Through the first five
months of 1999, the Fund has generated a total return of 0.18%, placing it in
the 21st percentile of its peer group, the Lipper Insured Municipal Debt Fund
category.*<F3>
Q What is the advantage of insured bonds compared to uninsured?
A First, the designation "insured" only refers to assuring timely payment of
interest and principal over the life of the bond. It does not protect against
short-term market fluctuations in price due to changes in interest rates. Other
less obvious benefits include higher levels of liquidity, attractive pricing
compared to other "AAA" issues, and broader diversification. Thus, we
frequently find that purchasing insured bonds provides better yields, liquidity,
and more selection than a universe of high quality uninsured bonds.
Q What is your outlook for this Fund for the remainder of the year?
A The strong economy has continued to put upward pressure on interest rates.
We expect the growth rate of the economy to soften later this year and do not
foresee a significant increase in inflation. We believe that real interest
rates (nominal rates less inflation) are high by historical standards and see
great value in the bond market overall. Credit quality in the municipal market
continues to be strong while credit spreads remain very tight.
We will continue the transition from lower coupon, longer maturity callable
bonds to higher coupon, intermediate non-callable bonds. The higher coupon
preference will help prevent bonds from falling to market discounts as rates
rise while the shift to intermediate maturities will also mitigate the effect of
rising rates on the value of the Fund. Going to a non-callable structure
enables the Fund to perform more equitably in rising and falling interest rate
environments going forward.
FIRSTAR STELLAR U.S. GOVERNMENT INCOME FUND
Q Rising interest rates have made 1999 a difficult year for bond investors.
How has the U.S. Government Income Fund fared in this environment?
A Our outlook for 1999 started the year anticipating improved confidence and
liquidity. We also thought interest rates would remain within a range, or even
decline, for most of the year. While liquidity certainly returned in the first
few months of the year, a stronger than expected economy resulted in interest
rates rising steadily during the period. The U.S. Government Income Fund was
positioned to take advantage of lower yields and improved liquidity. Higher
interest rates have certainly not helped returns. However, the bond market
offers good values currently and this has provided us a tremendous opportunity
to adjust portfolio holdings.
Q When you say "good values" and "opportunities" what does that mean for
shareholders?
A One way of evaluating values is on the basis of "real yields" or yields
adjusted for inflation. Assuming inflation as measured by the Consumer Price
Index (CPI) is at worst 2.5%, the real yield on Treasury bonds is close to 4.5%.
Over the past 60 years, when real bond yields have been above 3.5% bonds have
been attractive. Thus, we have been able to increase the Fund's average
maturity and lock-in high yields.
Another "opportunity" has developed in non-callable bonds. Provided yields rise
slowly, callable bonds tend to have better relative performance than non-
callable bonds. This is certainly the environment that we find ourselves
presently. We were able to sell callable bonds (such as mortgage-backed
securities) and purchase non-callable bonds without sacrificing much yield. The
major advantage will become evident in the Fund's performance should interest
rates decline over the coming months.
*<F3> Lipper figure represents the average of the total returns reported by
all of the mutual funds designated by Lipper Analytical Services, Inc. as
falling into the category indicated. This figure does not reflect sales
charges.
Q What is your outlook for the remainder of 1999?
A Our outlook for the remainder of 1999 anticipates the pace of economic
growth to slow towards a more moderate level. More importantly, we believe
inflation will remain under 2.5% for the year. Gold and other non-oil commodity
prices are signaling little inflationary pressures building and the dollar
remains strong. We believe the Federal Reserve will raise the Federal funds
rate slightly from 4.75% to 5.25% before year-end to remove some of the
"insurance policy" adjustments from last fall.
In terms of bond yields, the fundamental outlook leans positive. Our "bond
market barometer" model of 13 economic indicators remains in bullish territory.
The secular, or long-term, decline in yields remains intact as real yields
remain well above historical averages and above real-GDP growth rates. U.S. bond
yields remain attractive in a global context. Technicals have improved
dramatically over the past several weeks. Seasonal patterns support a move
towards lower bond yields through the summer months. Major support for bonds
remains near 6.25% based on trend lines, asset allocation, and psychological
factors. Taken together, we believe bond yields are close to their high point
for the year and offer tremendous value.
FIRSTAR STELLAR STRATEGIC INCOME FUND
Q Performance of the Strategic Income Fund was hurt in 1998 by declining
returns for real estate investment trust (REIT) securities. How are REITs doing
so far in 1999?
A REITs indeed had a tough year in 1998, positioning a total return of
(16.90)% (Morgan Stanley REIT Index).*<F4> Even the first quarter of 1999 saw
little relief as the group declined another 5%. However, the environment
changed with strong earnings reports and a solid domestic economy. Market
perceptions shifted and REITs as a group are up nearly 7% through May.
Maintaining a full, diversified exposure to REITs has helped the Fund generate
solid performance relative to other bond funds while maintaining a high dividend
yield.
Q How have the other segments of the Fund performed?
A Our outlook for 1999 envisioned corporate and mortgage-backed bonds
providing better total returns compared to Treasury securities. Through May,
both corporate and mortgage-related bonds are outpacing Treasury securities.
The Fund has maintained approximately a 40% allocation to corporate bonds in a
variety of industries that have benefited from stronger economic growth such as
energy, automotive and retail companies.
Mortgage-backed securities perform best in stable to slightly higher interest
rate environments. These securities have been some of the best performing
securities in the portfolio, but there is a limit to the buffer that they offer
as yields increase. For this reason, we took advantage of strong performance
and reduced the risk exposure to mortgage-backed securities.
Equity markets continued their strong performance into 1999. Given the low
level of yields generally available in the general equity market, we concentrate
on "value" type issues. Favorite industries include electric utilities and
finance. While these industries have lagged the overall stock market, we find
their low volatility and high yields attractive for the Fund.
In summary, the Strategic Income Fund has accomplished its goal of delivering a
high yield. Relative to other bond funds, the Fund's total return is
competitive thus far in 1999.
Q What is your outlook for the remainder of 1999?
A We mentioned in the review of the U.S. Government Income Fund that we
believe bond yields are near their peak for 1999. As for the fixed-income
sectors, we are still advocating an overweight in corporate and mortgage-backed
securities. Cyclical industry bonds have lagged the performance of less cyclical
industries. With no recession in sight, we have shifted into more economically
sensitive names. Mortgage-related bonds have performed well over the past six
months. While we believe this sector will complete the year with top
performance, we have been reducing risk exposure. The principal method is
through selectively moving into lower coupon bonds which will perform better
should interest rates decline.
*<F4>The Morgan Stanley REIT Index is comprised of the most actively traded
real estate investment trusts which is designed to measure real estate equity
performance.
PORTFOLIOS OF INVESTMENTS
FIRSTAR STELLAR INSURED TAX-FREE BOND FUND May 31,1999 (unaudited)
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PRINCIPAL AMOUNT VALUE
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LONG-TERM MUNICIPALS - 98.9%
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ALABAMA - 5.5%
$1,750,000 Alabama Water PCA, Revenue Bonds,
(AMBAC INS), 6.70%, 8/15/2006 $1,855,122
2,500,000 Alabama Water PCA, Revenue Bonds,
(AMBAC INS), 5.50%, 8/15/2012 2,610,875
2,500,000 Bessemer, AL Water Revenue,
Revenue Bonds, (AMBAC INS),
5.75%, 7/1/2016 2,651,450
1,500,000 Jefferson County, AL, Sewer,
Revenue Bonds, (MBIA INS),
5.65%, 9/1/2008 1,619,700
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Total 8,737,147
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ALASKA - 2.8%
4,040,000 Alaska Energy Authority Power,
Revenue Bonds, Bradley Lake,
(FSA INS), 6.00%, 7/1/2011 4,443,556
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COLORADO - 0.8%
1,250,000 Colorado Post-Secondary Education
Facilities, Revenue Bonds, Auraria
Foundation Project, (FSA INS),
5.75%, 9/1/2010 1,335,712
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FLORIDA - 1.8%
1,280,000 Florida State Department of
Transportation, Revenue Bonds,
(FGIC INS), 5.125%, 7/1/2013 1,301,427
1,500,000 Orlando & Orange County Expressway
Authority, FL, Revenue Bonds,
(AMBAC INS), 5.375%, 7/1/2008 1,571,220
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Total 2,872,647
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ILLINOIS - 20.6%
1,100,000 Chicago, IL, GO UT, (MBIA INS),
5.375%, 1/1/2013 1,150,798
2,000,000 Chicago, IL Park District, GO UT,
(MBIA INS), 5.60%, 1/1/2014 2,085,980
1,500,000 Cook County, IL, GO UT, (MBIA INS),
5.375%, 11/15/2012, Prerefunded
11/15/2002 1,610,910
2,235,000 Cook County, IL School District No. 97,
GO UT, (FGIC INS), 9.00%, 12/1/2011 3,085,686
1,000,000 Cook County, IL School District No. 123,
GO LT, (FSA INS), 6.20%, 12/1/2008 1,121,700
2,500,000 Illinois Health Facilities Authority,
Revenue Bonds, Advocate Health Care
Network, (MBIA INS), 5.80%, 8/15/2016 2,641,625
2,225,000 Illinois State, GO UT, (MBIA INS),
6.10%, 2/1/2017 2,388,938
1,410,000 Illinois State, GO UT, (MBIA INS),
5.75%, 5/1/2021 1,468,332
2,400,000 McHenry County, IL Community Unit
School District No. 200, Series A, GO UT,
(FSA INS), 5.85%, 1/1/2016,
Prerefunded 1/1/2008 2,549,376
1,000,000 Northern Illinois University, Revenue
Bonds, (FGIC INS), 5.70%, 4/1/2016 1,039,480
2,500,000 Regional Transportation Authority Series A,
Revenue Bonds, (AMBAC INS),
6.00%, 6/1/2009 2,718,250
3,045,000 Will County, IL Community Unit School
District No. 365, GO UT, (FSA INS),
0.00%, 11/1/2010 *<F5> 1,730,078
2,500,000 Will County, IL Forest Preservation
District, GO UT, (AMBAC INS),
6.00%, 12/1/2006 2,657,100
5,805,000 Will County, IL Forest Preservation
District, GO UT, (FGIC INS),
6.00%, 12/1/2010 6,461,662
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Total 32,709,915
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INDIANA - 1.3%
2,000,000 Indiana Transportation Finance
Authority, Airport Lease, Revenue
Bonds Series A, (AMBAC INS),
5.00%, 11/1/2007 2,080,080
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KENTUCKY - 1.6%
2,500,000 Jefferson County, KY HFDA,
Revenue Bonds, University
Medical Center, Inc., (MBIA INS),
5.50%, 7/1/2017 2,571,050
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LOUISIANA - 4.1%
2,030,000 Baton Rouge, LA Sales & Use
Tax Public Improvements
Series A, (FGIC INS),
5.25%, 8/1/2015 2,061,810
1,000,000 Jefferson Parish, LA, Revenue Bonds,
(AMBAC INS), 5.00%, 11/1/2011 1,018,050
1,500,000 Louisiana PFA, Revenue Bonds,
Tulane University, (MBIA INS),
5.10%, 11/15/2014 1,502,985
1,000,000 Louisiana Stadium & Expo District
Hotel Occupancy Tax Series B, Revenue
Bonds, (FGIC INS), 5.25%, 7/1/2018 1,003,060
1,000,000 Terrebonne Parish, LA Hospital Service
District No. 1, Revenue Bonds, Terrebonne
General Medical Center, (AMBAC INS),
5.25%, 4/1/2014 1,003,620
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Total 6,589,525
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MAINE - 2.5%
4,000,000 Maine Municipal Board Series D,
(AMBAC INS), 5.35%, 11/1/2017 4,071,160
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MASSACHUSETTS - 2.3%
1,000,000 Martha's Vineyard, MA Series A,
Revenue Bonds, (FSA INS),
5.125%, 5/1/2018 992,780
2,500,000 Massachusetts Water Resources
Authority, Revenue Bonds, (FGIC INS),
5.40%, 11/1/2011 2,697,150
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Total 3,689,930
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MICHIGAN - 9.1%
1,000,000 Clarkston Community Schools, MI,
GO UT, (MBIA INS), 5.25%, 5/1/2017 1,005,430
2,450,000 Dearborn, MI Economic Development
Corp., Revenue Bonds, Oakwood
Obligated Group, (FGIC INS),
5.75%, 11/15/2015 2,598,911
1,200,000 Haslett, MI Public School District, GO UT,
(MBIA INS), 5.70%, 5/1/2016,
Prerefunded 5/1/2007 1,306,308
1,000,000 Lanse Creuse, MI Public School District,
(AMBAC INS), 5.25%, 5/1/2016 1,010,610
1,500,000 Lansing, MI Sewer Disposal System,
Revenue Bonds, (MBIA INS), 6.25%,
5/1/2007, Prerefunded 5/1/2001 1,599,150
2,500,000 Michigan State Comprehensive
Transportation Board, Revenue Bonds,
5.75%, 5/15/2004 2,657,950
1,065,000 Richmond, MI Community School District,
GO UT, School Improvements,
(AMBAC INS), 5.60%, 5/1/2018,
Prerefunded 5/1/2006 1,148,113
1,000,000 Wyoming, MI, Revenue Bonds,
(MBIA INS), 5.25%, 5/1/2018 1,003,490
2,000,000 Ypsilanti, MI School District, GO UT,
(FGIC INS), 5.60%, 5/1/2012,
Prerefunded 5/1/2007 2,163,900
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Total 14,493,862
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MONTANA - 1.6%
2,550,000 Montana State Health Facilities Authority,
Revenue Bonds, Sisters of Charity,
Leavenworth, (MBIA INS), 5.125%,
12/1/2018 2,519,018
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NEBRASKA - 0.7%
1,000,000 Omaha, NE Public Power District
Series B, Electric Revenue Bonds,
6.00%, 2/1/2007, Escrowed to maturity 1,106,960
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NEVADA - 5.1%
1,000,000 Clark County, NV, Revenue Bonds,
(MBIA INS), 5.90%, 6/1/2009,
Prerefunded 6/1/2009 1,089,150
2,500,000 Clark County, NV School District, GO UT,
(FGIC INS), 5.75%, 6/15/2010 2,737,650
2,500,000 Clark County, NV School District, GO UT,
(MBIA INS), 5.80%, 6/15/2011 2,730,350
1,500,000 Washoe County, NV School District, GO UT,
(MBIA INS), 5.75%, 6/1/2011 1,602,195
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Total 8,159,345
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OHIO - 16.2%
2,555,000 Clermont County, OH, GO UT,
(AMBAC INS), 6.00%, 5/15/2007 2,738,526
2,460,000 Cleveland, OH Waterworks Series H,
Improvement Revenue Bonds, (MBIA INS),
5.75%, 1/1/2016, Prerefunded 1/1/2006 2,703,638
40,000 Cleveland, OH Waterworks Series H,
Improvement Revenue Bonds, (MBIA INS),
5.75%, 1/1/2016, Unrefunded balance 42,344
1,000,000 Columbus, OH Sewer System,
Revenue Bonds, 6.25%, 6/1/2008 1,075,100
3,000,000 Columbus, OH Water System,
Revenue Bonds, 6.375%, 11/1/2010,
Prerefunded 11/1/2001 3,238,200
3,500,000 Greater Cleveland Regional Transportation
Authority, OH, GO UT, (FGIC INS),
5.65%, 12/1/2016,
Prerefunded 12/1/2006 3,831,765
1,000,000 Hamilton County, OH Hospital Facilities
Authority, Revenue Bonds, Children's
Hospital Medical Center, Cincinnati,
(FGIC INS), 5.20%, 5/15/2009 1,048,000
2,000,000 Montgomery County, OH, Water Revenue
Bonds, Greater Moraine-Beaver Creek,
(FGIC INS), 6.25%, 11/15/2012 2,170,560
1,000,000 Ohio State Building Authority, Adult
Correctional Facilities Revenue Bonds,
Adult Correctional Facilities, (MBIA INS),
5.70%, 10/1/2006 1,080,810
1,000,000 Ohio State Building Authority, Revenue
Bonds, State Facilities - Administration
Building, (MBIA INS), 6.00%, 10/1/2008 1,096,230
1,225,000 Ohio State Building Authority, Revenue
Bonds, State Facilities - Administration
Building, (MBIA INS), 6.00%, 10/1/2009 1,345,969
1,000,000 Ohio State Turnpike Commission Series A,
(MBIA INS), 5.70%, 2/15/2013 1,064,930
2,000,000 Ohio State Water Development Authority,
Pollution Control Revenue Bonds,
(MBIA INS), 5.25%, 12/1/2009 2,087,600
1,000,000 Ohio State Water Development Authority,
Revenue Bonds, (AMBAC INS), 5.80%,
12/1/2011, Escrowed to maturity 1,107,640
1,000,000 Sylvania, OH City School District, GO UT,
(FGIC INS), 5.80%, 12/1/2015 1,060,930
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Total 25,692,242
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PENNSYLVANIA - 3.9%
1,000,000 Bucks County, PA Water & Sewer
Authority, Revenue Bonds,
(FGIC INS), 5.55%, 12/1/2017 1,028,970
2,000,000 Chester Upland School Authority, PA,
Series A, Revenue Bonds,
(FSA INS), 5.25%, 9/1/2017 2,011,140
1,000,000 Pennsylvania State Higher Education
Facilities Authority Series A, Revenue
Bonds, University of Pennsylvania -
Health Services, 5.25%, 1/1/2012 1,022,810
2,000,000 Somerset County, PA General Authority,
Commonwealth Lease, Revenue Bonds,
(FGIC INS), 6.60%, 10/15/2002,
Prerefunded 10/15/2001 2,131,600
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Total 6,194,520
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TEXAS - 5.7%
2,500,000 Harris County, TX HFDC, Revenue Bonds,
Memorial Hospital System,
(MBIA INS), 5.75%, 6/1/2019 2,623,125
1,000,000 Houston, TX Water Conveyance System
Contract, Certificate Participation Series J,
(AMBAC INS), 6.125%, 12/15/2009 1,112,570
2,500,000 Port Houston Authority, TX Harris County,
Revenue Bonds, (MBIA INS),
6.50%, 5/1/2005 2,645,675
2,500,000 Texas Water Development Board,
Revenue Bonds, 5.50%, 7/15/2010 2,622,150
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Total 9,003,520
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UTAH - 3.3%
2,500,000 Davis County, UT School District, GO UT,
(MBIA INS), 5.70%, 6/1/2007 2,697,350
2,400,000 Jordan, UT School District, GO UT, 5.90%,
6/15/2004, Prerefunded 12/1/2004 2,556,144
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Total 5,253,494
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VIRGINIA - 0.7%
1,000,000 Chesapeake Bay Bridge & Tunnel
District, VA, Revenue Bonds, (FGIC INS),
5.60%, 7/1/2007 1,077,420
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WASHINGTON - 3.4%
2,500,000 Seattle, WA Municipal Lighting & Power,
Revenue Bonds, 6.10%, 7/1/2005,
Prerefunded 7/1/2004 2,765,175
2,500,000 Tacoma, WA Electric System,
Revenue Bonds, (AMBAC INS),
6.15%, 1/1/2008 2,671,600
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Total 5,436,775
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WASHINGTON, D.C. - 0.9%
1,350,000 District of Columbia, Revenue Bonds,
Association of American Medical
Colleges, (AMBAC INS),
5.375%, 2/15/2017 1,361,502
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SHARES OR PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------
WISCONSIN - 5.0%
1,000,000 Beloit, WI School District, GO UT,
(MBIA INS), 6.125%, 10/1/2007,
Prerefunded 10/1/2001 1,054,200
2,460,000 Wisconsin Health and Educational
Facilities Authority, Revenue Bonds,
Aurora Medical Group, (FSA INS),
5.60%, 11/15/2016 2,529,200
2,000,000 Wisconsin Health and Educational
Facilities Authority, Revenue Bonds,
Meriter Hospital, Inc., (MBIA INS),
6.00%, 12/1/2017 2,119,600
2,095,000 Wisconsin State, GO UT, (FGIC INS),
5.50%, 5/1/2010 2,204,044
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Total 7,907,044
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TOTAL LONG-TERM MUNICIPALS
(IDENTIFIED COST $150,930,475) 157,306,424
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MUTUAL FUNDS - 1.7%
2,644,968 SEI Tax Exempt Money Market Fund 2,644,968
36,372 Tax-Free Inv. Co. 36,372
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TOTAL MUTUAL FUNDS (IDENTIFIED COST $2,681,340) 2,681,340
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TOTAL INVESTMENTS - 100.6%
(IDENTIFIED COST $153,611,815) 159,987,764
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LIABILITIES, LESS OTHER ASSETS - (0.6%) (940,104)
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TOTAL NET ASSETS - 100.0% $159,047,660
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*<F5> Non-income producing
(See Notes to Financial Statements.)
FIRSTAR STELLAR U.S. GOVERNMENT INCOME FUND May 31,1999 (unaudited)
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PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS - 31.9%
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BANKING - 3.6%
$1,500,000 Citicorp, 8.625%, 12/1/2002 $1,604,520
3,000,000 Citigroup Inc., 9.50%, 3/1/2002 3,237,255
1,000,000 NationsBank Corp., 5.75%, 3/15/2001 995,332
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Total 5,837,107
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CHEMICALS - 0.7%
1,048,977 Dow Chemical Co., 7.60%, 1/2/2002 1,070,979
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DEFENSE - 1.2%
2,000,000 Martin Marietta Corp., 6.50%, 4/15/2003 2,001,900
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ELECTRONICS - 0.4%
750,000 Motorola, Inc., 6.50%, 11/15/2028 685,612
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ENERGY SERVICES - 1.2%
2,000,000 Halliburton Co., 6.30%, 8/5/2002 1,987,982
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FINANCE - 9.2%
2,000,000 Associates Corp. of North America,
7.25%, 5/22/2006 2,056,290
500,000 Ford Motor Credit Corp.,
6.11%, 12/28/2001 498,942
1,500,000 General Electric Global Insurance
Holding Corp., 7.00%, 2/15/2026 1,512,622
1,000,000 Goldman Sachs Group, 6.65%, 5/15/2009 989,280
3,750,000 International Lease Finance Corp.,
6.25%, 10/15/2000 3,775,477
250,000 International Lease Finance Corp.,
8.375%, 12/15/2004 271,041
1,000,000 Lehman Brothers Inc.,
7.125%, 7/15/2002 1,008,040
2,000,000 Merrill Lynch & Co., Inc.,
6.00%, 2/17/2009 1,880,990
1,500,000 Morgan Stanley Dean Witter & Co.,
5.625%, 1/20/2004 1,450,805
1,500,000 Sears Roebuck Acceptance Corp.,
7.00%, 6/15/2007 1,519,070
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Total 14,962,557
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HOUSEHOLD PRODUCTS - 0.6%
1,000,000 Procter & Gamble Co., 7.375%, 3/1/2023 991,427
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INTERNATIONAL - 1.7%
100,000 Koninklijke Philips Electronics NV,
8.375%, 9/15/2006 107,436
2,000,000 TransCanada PipeLines Ltd.,
9.125%, 4/20/2006 2,175,700
430,000 TransCanada PipeLines Ltd.,
8.625%, 5/15/2012 496,590
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Total 2,779,726
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OIL - 4.2%
1,000,000 Ashland Inc., 7.90%, 8/5/2006 1,039,145
850,000 Chevron Capital USA, Inc.,
7.45%, 8/15/2004 869,129
1,750,000 Enron Corp., 7.625%, 9/10/2004 1,820,861
3,000,000 Occidental Petroleum Corp.,
8.50%, 11/9/2001 3,093,573
- --------------------------------------------------------------------------------
Total 6,822,708
- --------------------------------------------------------------------------------
REAL ESTATE - 3.5%
1,000,000 Highwoods Forsyth LP, 7.19%, 6/15/2004 956,214
1,000,000 Irvine Apartment Communities, Inc.,
7.00%, 10/1/2007 907,696
2,000,000 Meditrust Corp., 7.82%, 9/10/2026 1,777,580
1,000,000 Post Apartment Homes LP,
7.30%, 4/1/2004 1,018,394
1,000,000 United Dominion Realty Trust, Inc.,
7.95%, 7/12/2006 962,852
- --------------------------------------------------------------------------------
Total 5,622,736
- --------------------------------------------------------------------------------
RETAIL - 0.6%
1,000,000 Safeway, Inc., 5.875%, 11/15/2001 987,587
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS - 2.1%
2,000,000 GTE California, Inc., 5.50%, 1/15/2009 1,843,520
1,500,000 GTE Corp., 7.83%, 5/1/2023 1,510,766
- --------------------------------------------------------------------------------
Total 3,354,286
- --------------------------------------------------------------------------------
UTILITIES - ELECTRIC - 2.9%
4,250,000 Georgia Power Co., 6.625%, 4/1/2003 4,230,012
500,000 Northern Illinois Gas Co.,
7.26%, 10/15/2025 484,901
- --------------------------------------------------------------------------------
Total 4,714,913
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $52,831,838) 51,819,520
- --------------------------------------------------------------------------------
GOVERNMENT AGENCIES - 34.5%
- --------------------------------------------------------------------------------
FANNIE MAE - 20.3%
4,000,000 4.39%, 10/13/2000 3,942,040
4,000,000 5.42%, 1/23/2001 3,989,404
1,500,000 5.36%, 2/16/2001 1,493,909
3,000,000 5.41%, 12/15/2003 2,908,554
10,318,000 5.125%, 2/13/2004 9,972,357
1,250,000 6.50%, 11/25/2007, REMIC,
Series 1993-118-H 1,252,200
5,000,000 6.00%, 2/25/2011, REMIC,
Series 1996-21-PK 4,868,377
299,230 6.00%, 8/1/2013 288,564
4,250,000 6.50%, 4/25/2023, REMIC,
Series 1993-210-PL 4,194,159
- --------------------------------------------------------------------------------
Total 32,909,564
- --------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK - 8.8%
6,000,000 5.475%, 3/15/2001 5,985,498
1,500,000 5.40%, 1/15/2003 1,475,420
1,000,000 5.79%, 5/27/2003 994,231
3,000,000 5.575%, 9/2/2003 2,954,979
1,000,000 5.038%, 10/14/2008 918,987
2,000,000 5.705%, 3/2/2009 1,930,520
- --------------------------------------------------------------------------------
Total 14,259,635
- --------------------------------------------------------------------------------
FREDDIE MAC - 5.4%
2,075,000 6.22%, 3/24/2003 2,094,872
2,000,000 7.585%, 9/19/2006 2,062,144
5,000,000 5.125%, 10/15/2008 4,673,985
- --------------------------------------------------------------------------------
Total 8,831,001
- --------------------------------------------------------------------------------
TOTAL GOVERNMENT AGENCIES
(IDENTIFIED COST $56,409,867) 56,000,200
- --------------------------------------------------------------------------------
U.S. TREASURIES - 31.5%
- --------------------------------------------------------------------------------
U.S. TREASURY BONDS - 24.7%
7,400,000 7.50%, 11/15/2016 8,466,066
1,500,000 9.00%, 11/15/2018 1,980,938
1,000,000 8.875%, 2/15/2019 1,308,750
3,500,000 8.125%, 8/15/2019 4,292,971
7,400,000 7.125%, 2/15/2023 8,329,625
5,500,000 6.75%, 8/15/2026 5,984,687
5,500,000 6.125%, 11/15/2027 5,558,437
2,000,000 5.50%, 8/15/2028 1,864,376
2,500,000 5.25%, 2/15/2029 2,292,188
- --------------------------------------------------------------------------------
Total 40,078,038
- --------------------------------------------------------------------------------
U.S. TREASURY NOTES - 6.8%
5,500,000 4.875%, 3/31/2001 5,446,722
4,500,000 6.50%, 5/31/2001 4,588,596
1,000,000 5.50%, 5/15/2009 992,500
- --------------------------------------------------------------------------------
Total 11,027,818
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURIES
(IDENTIFIED COST $52,240,141) 51,105,856
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT - 1.4%
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 1.4%
2,263,000 Donaldson, Lufkin and Jenrette
Securities Corp., 4.82%,
dated 5/28/1999, due 6/1/1999,
repurchase price $2,264,212
(Collateralized by U.S.
Government Securities) 2,263,000
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(IDENTIFIED COST $2,263,000) 2,263,000
- --------------------------------------------------------------------------------
CONTRACTS VALUE
- --------------------------------------------------------------------------------
OPTIONS PURCHASED - 0.0%
100 Put option on Chicago Board Options
Exchange 30-Year Treasury Bond Index,
expires 6/19/1999, strike @ $57.50 16,250
- --------------------------------------------------------------------------------
TOTAL OPTIONS PURCHASED
(IDENTIFIED COST $13,525) 16,250
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.3%
(IDENTIFIED COST $163,758,371) 161,204,826
- --------------------------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES - 0.7% 1,093,585
- --------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $162,298,411
- --------------------------------------------------------------------------------
(See Notes to Financial Statements.)
FIRSTAR STELLAR STRATEGIC INCOME FUND May 31,1999 (unaudited)
- --------------------------------------------------------------------------------
SHARES, PRINCIPAL AMOUNT OR CONTRACTS VALUE
- --------------------------------------------------------------------------------
DOMESTIC EQUITY - 9.3%
- --------------------------------------------------------------------------------
COMMON STOCKS - 4.4%
- --------------------------------------------------------------------------------
APPLIANCES - 0.2%
5,000 Whirlpool Corp. $322,500
- --------------------------------------------------------------------------------
BANKING & FINANCE - 0.5%
10,000 First Union Corp. 460,625
10,000 Fleet Financial Group, Inc. 411,250
- --------------------------------------------------------------------------------
Total 871,875
- --------------------------------------------------------------------------------
ENERGY - 0.3%
15,000 Ashland Inc. 611,250
- --------------------------------------------------------------------------------
INSURANCE - 0.3%
15,000 Ohio Casualty Corp. 570,937
- --------------------------------------------------------------------------------
TOBACCO - 0.2%
10,000 Philip Morris Cos., Inc. 385,625
- --------------------------------------------------------------------------------
UTILITIES - 2.9%
20,000 Central and South West Corp. 515,000
10,000 Duke Energy Corp. 603,125
68,000 GPU, Inc. 2,962,250
35,000 Texas Utilities Co. 1,575,000
- --------------------------------------------------------------------------------
Total 5,655,375
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $8,389,342) 8,417,562
- --------------------------------------------------------------------------------
PREFERRED STOCKS - 4.9%
- --------------------------------------------------------------------------------
ENERGY - 0.9%
68,200 Enron Capital Trust I, Pfd., $2.08 1,760,413
- --------------------------------------------------------------------------------
FINANCE - 3.6%
80,000 Citigroup Capital Trust I, Pfd., $2.00 2,065,000
40,000 Merrill Capital Trust V, Pfd., $1.82 1,007,500
136,500 PLC Capital Trust I, Pfd., Series B, $2.06 3,574,594
10,000 Sears, Roebuck Acceptance
Corp., Pfd., $1.74 246,875
- --------------------------------------------------------------------------------
Total 6,893,969
- --------------------------------------------------------------------------------
UTILITIES - 0.4%
15,000 Alabama Power Capital Trust II, Pfd., $1.90 385,313
17,500 Detroit Edison Co., Pfd., $1.84 435,312
- --------------------------------------------------------------------------------
Total 820,625
- --------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(IDENTIFIED COST $9,408,002) 9,475,007
- --------------------------------------------------------------------------------
TOTAL DOMESTIC EQUITY
(IDENTIFIED COST $17,797,344) 17,892,569
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 19.3%
45,000 American Health Properties, Inc. 900,000
20,000 Archstone Communities Trust 450,000
15,000 Avalonbay Communities, Inc. 530,625
20,000 Camden Property Trust 548,750
50,000 CarrAmerica Realty Corp. 1,246,875
50,000 Crescent Real Estate Equities Co. 1,153,125
40,000 Equity Office Properties Trust 1,130,000
5,000 Equity Residential Properties Trust 239,687
110,625 Glimcher Realty Trust 1,873,711
30,000 Health Care Property Investors, Inc. 909,375
114,637 Healthcare Realty Trust, Inc. 2,479,025
9,200 Highwoods Properties, Inc. 242,075
23,000 Highwoods Properties, Inc., Pfd., $2.00 534,750
55,000 Hospitality Properties Trust 1,491,875
40,000 IRT Property Co. 387,500
30,000 Kimco Realty Corp. 1,198,125
42,100 Kimco Realty Corp.,
Cumulative Pfd., $2.13 1,068,288
157,319 LTC Properties, Inc. 2,094,309
98,000 Lexington Corporate Properties Trust 1,145,375
40,000 Meditrust Corp. 555,000
80,000 National Health Investors, Inc. 1,875,000
5,000 Nationwide Health Properties, Inc. 101,875
139,214 Omega Healthcare Investors 3,654,367
93,656 Pennsylvania Real Estate Investment Trust 1,943,362
45,000 Public Storage, Inc., Pfd., Series F, $2.44 1,248,750
110,000 RFS Hotel Investors, Inc. 1,505,625
76,600 Realty Income Corp. 1,833,613
146,000 Sizeler Property Investors, Inc. 1,286,625
105,800 Town & Country Trust 1,785,375
4,300 United Dominion Realty Trust, Inc.,
Cumulative Pfd., $2.15 104,813
15,000 United Dominion Realty Trust, Inc., Pfd.,
Series A, $2.31 371,250
114,000 Winston Hotels, Inc. 1,090,125
- --------------------------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUSTS
(IDENTIFIED COST $41,007,506) 36,979,250
- --------------------------------------------------------------------------------
CORPORATE BONDS - 40.5%
- --------------------------------------------------------------------------------
AUTOMOTIVE - 1.6%
$2,925,000 Ford Motor Co., 7.50%, 8/1/2026 2,994,050
- --------------------------------------------------------------------------------
BANKS & SAVINGS INSTITUTIONS - 1.9%
500,000 Capital Holding Corp., 9.25%, 5/7/2001 520,459
3,000,000 Citicorp, 7.25%, 10/15/2011 3,105,795
- --------------------------------------------------------------------------------
Total 3,626,254
- --------------------------------------------------------------------------------
COMPUTERS - 1.8%
3,500,000 Dell Computer Corp., 7.10%, 4/15/2028 3,386,324
- --------------------------------------------------------------------------------
DIVERSIFIED ENERGY - 2.3%
1,943,000 Occidental Petroleum Corp.,
10.125%, 9/15/2009 2,284,945
2,000,000 Occidental Petroleum Corp.,
10.69%, 7/27/2000 2,086,944
- --------------------------------------------------------------------------------
Total 4,371,889
- --------------------------------------------------------------------------------
ELECTRONICS - 0.5%
1,000,000 Loral Corp., 7.625%, 6/15/2025 1,018,150
- --------------------------------------------------------------------------------
ENERGY - 3.4%
750,000 Ashland Inc., Series F, 7.90%, 8/5/2006 779,359
1,500,000 Ashland Inc., 7.78%, 9/19/2016 1,510,905
2,000,000 Atlantic Richfield Co., Series B,
8.60%, 5/15/2012 2,320,048
500,000 Chevron Capital USA, Inc.,
7.45%, 8/15/2004 511,253
1,000,000 Coastal Corp., 9.625%, 5/15/2012 1,190,168
289,000 Duke Energy Corp., 7.875%, 5/1/2024 299,736
- --------------------------------------------------------------------------------
Total 6,611,469
- --------------------------------------------------------------------------------
ENERGY - OIL EXPLORATION - 1.5%
2,900,000 Noble Affiliates, Inc., 8.00%, 4/1/2027 3,011,157
- --------------------------------------------------------------------------------
FINANCE - 10.7%
1,500,000 Associates Corp. of North America,
Medium Term Note, 7.25%, 5/22/2006 1,542,218
4,000,000 Banc One Corp., 8.00%, 4/29/2027 4,302,000
1,000,000 Citigroup Inc., 9.50%, 3/1/2002 1,079,085
2,000,000 Highwoods Forsyth LP, 7.19%, 6/15/2004 1,912,428
1,500,000 International Lease Finance Corp.,
8.375%, 12/15/2004 1,626,246
3,500,000 Lehman Brothers Holdings Inc.,
7.25%, 10/15/2003 3,540,204
2,000,000 Lehman Brothers Inc.,
6.625%, 2/15/2008 1,945,520
4,150,000 NationsBank Capital Trust IV,
8.25%, 4/15/2027 4,358,442
- --------------------------------------------------------------------------------
Total 20,306,143
- --------------------------------------------------------------------------------
GROCERY STORE - RETAIL - 1.1%
2,000,000 Safeway, Inc., Medium Term Note,
8.57%, 4/1/2003 2,127,986
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 1.0%
2,000,000 Procter & Gamble Co., 7.375%, 3/1/2023 1,982,854
- --------------------------------------------------------------------------------
INDUSTRIAL - 3.3%
2,200,000 Fort James Corp., 6.625%, 9/15/2004 2,199,239
2,000,000 Lockheed Martin Corp.,
7.875%, 3/15/2023 2,030,758
2,000,000 Weyerhaeuser Co., 7.50%, 3/1/2013 2,082,624
- --------------------------------------------------------------------------------
Total 6,312,621
- --------------------------------------------------------------------------------
INSURANCE - 1.1%
2,000,000 Ohio National Life Insurance Co.,
8.875%, 7/15/2004 2,153,988
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 4.3%
1,125,000 Irvine Apartment Communities, Inc.,
7.00%, 10/1/2007 1,021,158
200,000 Meditrust Corp., 7.60%, 7/15/2001 189,632
1,000,000 Post Apartment Homes LP,
7.30%, 4/1/2004 1,018,394
2,000,000 Spieker Properties, Inc.,
8.00%, 7/19/2005 2,026,036
4,175,000 United Dominion Realty Trust, Inc.,
7.25%, 1/15/2007 3,898,740
- --------------------------------------------------------------------------------
Total 8,153,960
- --------------------------------------------------------------------------------
RETAIL & APPAREL - 2.7%
2,250,000 Federated Department Stores, Inc.,
7.45%, 7/15/2017 2,294,455
1,050,000 Penney (J.C.) Co., Inc., 9.45%,
7/15/2002 1,077,336
1,000,000 Penney (J.C.) Co., Inc., 7.95%,
4/1/2017 1,014,731
725,000 Sears, Roebuck & Co., 8.66%,
10/2/2006 790,132
- --------------------------------------------------------------------------------
Total 5,176,654
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS - 1.8%
3,500,000 GTE Corp., 7.83%, 5/1/2023 3,525,119
- --------------------------------------------------------------------------------
TOBACCO - 0.5%
1,017,000 Philip Morris Cos., Inc., 7.125%,
8/15/2002 1,033,200
- --------------------------------------------------------------------------------
UTILITIES - 1.0%
2,000,000 Northern Illinois Gas Co.,
7.26%, 10/15/2025 1,939,606
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $79,767,366) 77,731,424
- --------------------------------------------------------------------------------
INTERNATIONAL SECURITIES - 11.9%
- --------------------------------------------------------------------------------
CLOSED-END INVESTMENT COMPANIES - 2.1%
220,000 First Commonwealth Fund Inc. 2,323,750
265,000 Kleinwort Benson Australian Income Fund 1,788,750
- --------------------------------------------------------------------------------
Total 4,112,500
- --------------------------------------------------------------------------------
ELECTRONICS - 0.6%
1,000,000 Koninklijke Philips Electronics NV,
8.375%, 9/15/2006 1,074,358
- --------------------------------------------------------------------------------
FINANCE - 6.0%
3,700,000 ABN-AMRO Bank NV, New York,
7.75%, 5/15/2023 3,865,109
3,000,000 Societe Generale, New York,
7.40%, 6/1/2006 3,052,986
4,500,000 Zurich Capital Trust, 8.376%, 6/1/2037 4,704,052
- --------------------------------------------------------------------------------
Total 11,622,147
- --------------------------------------------------------------------------------
INTERNATIONAL OIL - 3.2%
154,300 TransCanada PipeLines Ltd., Pfd., $2.13 4,011,800
1,645,000 TransCanada PipeLines Ltd.,
9.875%, 1/1/2021 2,055,000
- --------------------------------------------------------------------------------
Total 6,066,800
- --------------------------------------------------------------------------------
TOTAL INTERNATIONAL SECURITIES
(IDENTIFIED COST $24,325,867) 22,875,805
- --------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES - 17.3%
- --------------------------------------------------------------------------------
FANNIE MAE - 1.6%
24,754 10.00%, REMIC, 12/25/2018 24,971
303,782 8.40%, REMIC, 8/25/2019 312,911
1,960,046 7.50%, REMIC, 5/25/2020 1,970,542
798,080 9.50%, REMIC, 6/25/2020 837,933
- --------------------------------------------------------------------------------
Total 3,146,357
- --------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK - 0.9%
72,519 11.00%, 4/1/2003 74,496
463,254 9.00%, 5/1/2021 498,691
1,008,624 8.50%, 6/1/2024 1,072,004
- --------------------------------------------------------------------------------
Total 1,645,191
- --------------------------------------------------------------------------------
FREDDIE MAC - 5.9%
670,000 10.00%, REMIC, 12/15/2020 715,950
2,000,000 10.00%, REMIC, 1/15/2021 2,118,534
1,337,725 7.50%, REMIC, 7/15/2021 1,355,129
3,250,000 7.00%, REMIC, 1/15/2022 3,249,988
2,000,000 7.50%, REMIC, 5/20/2024 2,027,647
2,000,000 6.50%, REMIC, 3/15/2026 1,944,150
- --------------------------------------------------------------------------------
Total 11,411,398
- --------------------------------------------------------------------------------
GINNIE MAE - 8.9%
91,673 9.00%, 7/15/2016 98,943
294,075 9.00%, 1/15/2022 315,158
4,000,000 7.50%, REMIC, 5/16/2023 4,101,428
414,360 8.00%, 11/20/2026 427,917
671,245 7.50%, 12/15/2026 687,778
1,225,244 7.50%, 2/20/2027 1,248,369
2,405,691 7.50%, 6/15/2027 2,464,568
2,967,850 6.50%, 12/20/2028 2,884,184
5,012,624 6.00%, 5/15/2029 4,757,930
- --------------------------------------------------------------------------------
Total 16,986,275
- --------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $33,556,259) 33,189,221
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT - 0.8%
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 0.8%
1,515,000 Donaldson, Lufkin and Jenrette Securities
Corp., 4.82%, dated 5/28/1999,
due 6/1/1999, repurchase price
$1,515,811 (Collateralized by
U.S. Government Securities) 1,515,000
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(IDENTIFIED COST $1,515,000) 1,515,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.1%
(IDENTIFIED COST $197,969,342) 190,183,269
- --------------------------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES - 0.9% 1,754,301
- --------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $191,937,570
- --------------------------------------------------------------------------------
SCHEDULE OF CALL OPTIONS WRITTEN
200 American Health Properties, Inc.,
expires 7/17/1999,
exercise price $17.50 $56,250
200 American Health Properties, Inc.,
expires 7/17/1999,
exercise price $20.00 18,750
200 Central and South West Corp.,
expires 8/21/1999,
exercise price $25.00 33,750
100 Fleet Financial Group, Inc.,
expires 6/19/1999,
exercise price $40.00 18,750
250 GPU, Inc., expires 6/19/1999,
exercise price $37.50 154,687
250 GPU, Inc., expires 8/21/1999,
exercise price $40.00 104,688
350 Hospitality Properties Trust,
expires 6/19/1999,
exercise price $30.00 4,375
250 Hospitality Properties Trust,
expires 9/18/1999,
exercise price $30.00 10,156
200 Meditrust Corp., expires 7/17/1999,
exercise price $15.00 8,750
100 Meditrust Corp., expires 7/17/1999,
exercise price $17.50 1,250
- --------------------------------------------------------------------------------
TOTAL CALL OPTIONS WRITTEN
(PREMIUMS RECEIVED $232,758) 411,406
- --------------------------------------------------------------------------------
SCHEDULE OF PUT OPTIONS WRITTEN
100 Alcoa Inc., expires 7/17/1999,
exercise price $55.00 40,000
50 E. I. Du Pont de Nemours and Co.,
expires 7/17/1999,
exercise price $65.00 14,375
100 KeyCorp, expires 6/19/1999,
exercise price $35.00 16,250
50 Texaco Inc., expires 7/17/1999,
exercise price $55.00 2,969
50 Weyerhaeuser Co., expires 7/17/1999,
exercise price $60.00 10,938
- --------------------------------------------------------------------------------
TOTAL PUT OPTIONS WRITTEN
(PREMIUMS RECEIVED $49,973) 84,532
- --------------------------------------------------------------------------------
TOTAL OPTIONS WRITTEN
(PREMIUMS RECEIVED $282,731) $495,938
- --------------------------------------------------------------------------------
ABBREVIATIONS TO PORTFOLIOS OF INVESTMENTS
The following abbreviations are used in these portfolios:
AMBAC-- American Municipal Bond Assurance Corporation
FGIC -- Financial Guaranty Insurance Company
FSA -- Financial Security Assurance
GO -- General Obligation
HFDA -- Health Facility Development Authority
HFDC -- Health Facility Development Corporation
INS -- Insured
LP -- Limited Partnership
LT -- Limited Tax
MBIA -- Municipal Bond Investors Assurance
PCA -- Pollution Control Authority
PFA -- Public Facility Authority
REMIC-- Real Estate Mortgage Investment Conduit
UT -- Unlimited Tax
(See Notes to Financial Statements.)
STATEMENTS OF ASSETS AND LIABILITIES
May 31, 1999 (unaudited)
<TABLE>
Firstar Stellar Firstar Stellar Firstar Stellar
Insured U.S. Government Strategic
Tax-Free Income Income
Bond Fund Fund Fund
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Total investments in securities, at value $159,987,764 $161,204,826 $190,183,269
Cash -- 349 139,851
Income receivable 2,290,967 2,224,115 2,210,809
Receivable for investments sold -- -- 997,375
Receivable for Fund shares sold -- 163,338 56,933
Other assets 1,959 -- 23,024
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 162,280,690 163,592,628 193,611,261
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 3,091,765 995,041 412,250
Payable for Fund shares redeemed -- 14,292 525,988
Income distribution payable -- 140,779 --
Options written, at value -- -- 495,938
Payable to affiliates 140,375 144,105 239,515
Accrued expenses 890 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 3,233,030 1,294,217 1,673,691
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $159,047,660 $162,298,411 $191,937,570
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets Consist of:
Paid in capital $152,645,943 $164,061,810 $216,327,333
Accumulated undistributed (distributions in
excess of) net investment income 39,225 106,743 (257,063)
Accumulated undistributed net realized gain (loss)
on investments and options (13,457) 683,403 (16,133,420)
Net unrealized appreciation (depreciation) on
investments and options 6,375,949 (2,553,545) (7,999,280)
- ------------------------------------------------------------------------------------------------------------------------------------
Total net assets $159,047,660 $162,298,411 $191,937,570
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
A Shares $159,047,660 $161,304,553 --
B Shares -- 993,858 $191,937,570
- ------------------------------------------------------------------------------------------------------------------------------------
Total net assets $159,047,660 $162,298,411 $191,937,570
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING:
A Shares 15,439,205 16,621,481 --
B Shares -- 102,475 20,854,439
- ------------------------------------------------------------------------------------------------------------------------------------
Total shares outstanding 15,439,205 16,723,956 20,854,439
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE:
A Shares $10.30 $9.70 --
B Shares -- $9.70 $9.20
- ------------------------------------------------------------------------------------------------------------------------------------
OFFERING PRICE PER SHARE:
A Shares $10.79(a)<F6> $10.05(b)<F7> --
B Shares -- $9.70 $9.20
- ------------------------------------------------------------------------------------------------------------------------------------
REDEMPTION PROCEEDS PER SHARE:
A Shares $10.30 $9.70 --
B Shares -- $9.22(c)<F8> $8.74(c)<F8>
- ------------------------------------------------------------------------------------------------------------------------------------
Investments, at identified cost $153,611,815 $163,758,371 $197,969,342
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Investments, at tax cost $153,611,815 $163,786,054 $200,235,565
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a)<F6> Computation of Offering price: 100/95.5 of net asset value.
(b)<F7> Computation of Offering price: 100/96.5 of net asset value.
(c)<F8> Computation of Redemption Proceeds: 95/100 of net asset value.
(See Notes to Financial Statements.)
STATEMENTS OF OPERATIONS
Six Months Ended May 31, 1999 (unaudited)
<TABLE>
Firstar Stellar Firstar Stellar Firstar Stellar
Insured U.S. Government Strategic
Tax-Free Income Income
Bond Fund Fund Fund
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest income $4,001,864 $4,793,747 $4,948,661
Dividend income -- -- 3,054,617
- ------------------------------------------------------------------------------------------------------------------------------------
Total income 4,001,864 4,793,747 8,003,278
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 585,419 464,184 934,816
Shareholder services fees 195,223 193,496 245,923
Administration fees 85,861 85,100 108,242
Portfolio accounting fees 28,030 30,282 31,010
Custodian fees 19,514 19,341 24,600
Transfer and dividend disbursing agent fees and expenses 18,130 18,172 30,688
Auditing fees 11,830 9,842 10,248
Printing and postage 7,028 6,650 6,902
Federal and state registration fees 6,398 8,288 7,854
Trustees' fees 2,982 2,982 2,870
Legal fees 2,128 2,226 2,590
Miscellaneous 770 602 770
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 963,313 841,165 1,406,513
- ------------------------------------------------------------------------------------------------------------------------------------
Waivers--
- ------------------------------------------------------------------------------------------------------------------------------------
Waiver of investment advisory fees (175,211) -- --
Waiver of shareholder services fees (136,267) (134,820) (172,224)
- ------------------------------------------------------------------------------------------------------------------------------------
Total waivers (311,478) (134,820) (172,224)
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses 651,835 706,345 1,234,289
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 3,350,029 4,087,402 6,768,989
- ------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND OPTIONS:
Net realized gain (loss) on investments and options (12,656) 1,135,872 (11,055,367)
Net change in unrealized appreciation (depreciation)
on investments and options (2,613,822) (8,686,758) 2,595,230
- ------------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND OPTIONS (2,626,478) (7,550,886) (8,460,137)
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $723,551 $(3,463,484) $(1,691,148)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Financial Statements.)
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
Firstar Stellar Firstar Stellar
Firstar Stellar Insured U.S. Government Strategic
Tax-Free Bond Fund Income Fund Income Fund
--------------------------------- ------------------------- ----------------------------
Six Months Six Months Six Months
Ended Year Ended Ended Year Ended Ended Year Ended
May 31, 1999 November 30, May 31, 1999 November 30, May 31, 1999 November 30,
(unaudited) 1998 (unaudited) 1998 (unaudited) 1998
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS--
Net investment income $3,350,029 $6,293,827 $4,087,402 $7,405,285 $6,768,989 $14,128,659
Net realized gain (loss)
on investments and options (12,656) 166,776 1,135,872 1,754,333 (11,055,367) (5,003,385)
Net change in unrealized appreciation
(depreciation) on investments
and options (2,613,822) 3,424,446 (8,686,758) 2,658,356 2,595,230 (14,077,724)
- ------------------------------------------------------------------------------------------------------------------------------------
Change in net assets resulting
from operations 723,551 9,885,049 (3,463,484) 11,817,974 (1,691,148) (4,952,450)
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from net investment income
A Shares (3,423,060) (6,255,253) (4,080,659) (7,416,798) -- --
B Shares -- -- (16,722) (7,290) (7,026,052) (14,227,658)
Distributions from net realized
gain on investments and options
A Shares (167,577) (324,276) -- -- -- --
B Shares -- -- -- -- -- (1,593,824)
- ------------------------------------------------------------------------------------------------------------------------------------
Change in net assets
from distributions to
shareholders (3,590,637) (6,579,529) (4,097,381) (7,424,088) (7,026,052) (15,821,482)
- ------------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS--
Proceeds from sales of shares 18,499,071 36,272,222 32,795,250 39,578,764 22,868,632 83,977,189
Net asset value of shares
issued to shareholders
in payment of distributions declared 66,817 108,994 1,592,789 2,917,392 2,121,014 5,175,549
Cost of shares redeemed (8,882,614) (16,046,687) (13,606,389) (35,257,729) (26,688,454) (45,437,959)
- ------------------------------------------------------------------------------------------------------------------------------------
Change in net assets
from share transactions 9,683,274 20,334,529 20,781,650 7,238,427 (1,698,808) 43,714,779
- ------------------------------------------------------------------------------------------------------------------------------------
Change in net assets 6,816,188 23,640,049 13,220,785 11,632,313 (10,416,008) 22,940,847
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 152,231,472 128,591,423 149,077,626 137,445,313 202,353,578 179,412,731
- ------------------------------------------------------------------------------------------------------------------------------------
End of period $159,047,660 $152,231,472 $162,298,411 $149,077,626 $191,937,570 $202,353,578
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(distributions in
excess of) net investment
income included in net
assets at end of period $39,225 $112,256 $106,743 $116,722 $(257,063) --
- ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Financial Statements.)
</TABLE>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
<TABLE>
NET REALIZED
AND DISTRIBUTIONS DISTRIBUTIONS
NET ASSET UNREALIZED DISTRIBUTIONS FROM NET IN EXCESS OF
VALUE, NET GAIN (LOSS) ON TOTAL FROM FROM NET REALIZED GAIN NET REALIZED GAIN
PERIOD ENDED BEGINNING INVESTMENT INVESTMENTS INVESTMENT INVESTMENT ON INVESTMENTS ON INVESTMENTS
NOVEMBER 30, OF PERIOD INCOME AND OPTIONS OPERATIONS INCOME AND OPTIONS AND OPTIONS
(D)<F12>
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
FIRSTAR STELLAR
INSURED TAX-FREE
BOND FUND
A SHARES
1997(a)<F9> $10.00 0.44 0.24 0.68 (0.43) -- --
1998 $10.25 0.46 0.26 0.72 (0.46) (0.02) --
1999(i)<F17> $10.49 0.22 (0.17) 0.05 (0.23) (0.01) --
FIRSTAR STELLAR
U.S. GOVERNMENT
INCOME FUND
A SHARES
1994 $10.25 0.55 (0.90) (0.35) (0.55) (0.11) --
1995 $9.24 0.60 0.74 1.34 (0.60) -- --
1996 $9.98 0.57 (0.15) 0.42 (0.57) -- --
1997 $9.83 0.57 0.04 0.61 (0.57) -- --
1998 $9.87 0.56 0.30 0.86 (0.55) -- --
1999(i)<F17> $10.18 0.26 (0.48) (0.22) (0.26) -- --
B SHARES
1998(c)<F11> $9.89 0.36 0.29 0.65 (0.36) -- --
1999(i)<F17> $10.18 0.26 (0.48) (0.22) (0.26) -- --
FIRSTAR STELLAR
STRATEGIC INCOME
FUND
B SHARES
1995(b)<F10> $10.00 0.69 0.55 1.24 (0.67) (0.04) (0.00)(h)<F16>
1996 $10.53 0.73 (0.04) 0.69 (0.72) -- --
1997 $10.50 0.73 0.18 0.91 (0.74) -- --
1998 $10.67 0.72 (0.94) (0.22) (0.73) (0.10) --
1999(i)<F17> $9.62 0.32 (0.41) (0.09) (0.33) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
RATIOS TO AVERAGE NET ASSETS
--------------------------------- NET ASSETS,
NET ASSET NET EXPENSE END PORTFOLIO
TOTAL VALUE, END TOTAL INVESTMENT WAIVER/ OF PERIOD TURNOVER
DISTRIBUTIONS OF PERIOD RETURN (E)<F13> EXPENSES INCOME REIMBURSEMENT (G)<F15> (000 OMITTED) RATE
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
(0.43) $10.25 6.91% 0.79%(f)<F14> 4.66%(f)<F14> 0.45%(f) <F14> $128,591 15%
(0.48) $10.49 7.20% 0.79% 4.43% 0.45% $152,231 14%
(0.24) $10.30 0.46% 0.83%(f)<F14> 4.29%(f)<F14> 0.40%(f) <F14> $159,048 9%
(0.66) $9.24 (3.53)% 0.97% 5.87% 0.23% $87,924 148%
(0.60) $9.98 14.90% 0.92% 6.23% 0.20% $109,666 236%
(0.57) $9.83 4.46% 0.92% 5.88% 0.20% $138,874 158%
(0.57) $9.87 6.46% 0.89% 5.88% 0.20% $137,445 140%
(0.55) $10.18 9.00% 0.91% 5.51% 0.20% $148,773 88%
(0.26) $9.70 (2.16)% 0.91%(f)<F14> 5.28%(f)<F14> 0.17%(f) <F14> $161,305 62%
(0.36) $10.18 6.71% 0.91%(f) 5.51%(f)<F14> 0.20%(f) <F14> $305 88%
(0.26) $9.70 (2.18)% 0.91%(f)<F14> 5.28%(f)<F14> 0.17%(f) <F14> $994 62%
(0.71) $10.53 12.71% 1.47%(f)<F14> 7.41%(f)<F14> 0.30%(f)<F14> $47,513 258%
(0.72) $10.50 6.99% 1.36% 7.26% 0.20% $110,775 201%
(0.74) $10.67 9.02% 1.26% 7.13% 0.20% $179,413 142%
(0.83) $9.62 (2.16)% 1.26% 7.19% 0.20% $202,354 146%
(0.33) $9.20 (0.90)% 1.25%(f)<F14> 6.88%(f)<F14> 0.17%(f)<F14> $191,938 40%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a)<F9> Reflects operations for the period from December 30, 1996 (date of
initial public investment) to November 30, 1997.
(b)<F10> Reflects operations for the period from December 12, 1994 (date of
initial public investment) to November 30, 1995.
(c)<F11> Reflects operations for the period from April 27, 1998 (date of
initial public investment) to November 30, 1998.
(d)<F12> Distributions are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These distributions did not represent a return of capital for federal income tax
purposes.
(e)<F13> Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge if applicable.
(f)<F14> Computed on an annualized basis.
(g)<F15> This voluntary expense decrease is reflected in both the expense and
net investment income ratios.
(h)<F16> Less than one cent per share.
(i)<F17> For the six months ended May 31, 1999 (unaudited).
(See Notes to Financial Statements.)
NOTES TO FINANCIAL STATEMENTS
May 31, 1999(unaudited)
(1) ORGANIZATION
Firstar Stellar Funds, formerly Star Funds (the "Trust") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as an open-end
management investment company. The Trust consists of ten diversified portfolios
and one non-diversified portfolio. The financial statements of the following
portfolios (individually referred to as the "Fund", or collectively as the
"Funds") are presented herein along with each Fund's investment objective:
PORTFOLIO NAME INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
Firstar Stellar Insured Tax- Provide current income which
Free Bond Fund is exempt from federal
("Stellar Tax-Free Bond Fund") income tax.
Firstar Stellar U.S. Government Provide current income.
Income Fund ("U.S.
Government Income Fund")
Firstar Stellar Strategic Income Fund Generate high current income.
("Strategic Income Fund")
The financial statements of the Money Market Funds and Stock Funds are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.
The Stellar Tax-Free Bond Fund issues one class of shares (A Shares); U.S.
Government Income Fund offers two classes of shares, (A Shares and B Shares);
and Strategic Income Fund issues one class of shares (B Shares).
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS
Equity securities traded on a securities exchange and securities traded in the
over-the-counter market are valued at the last reported sales price on the day
of valuation; other securities for which no sale was reported on that date, are
valued at the last quoted bid price. Corporate and municipal bonds, asset-backed
securities and U.S. government securities are valued using the last quoted bid
price as furnished by an independent pricing service. Short-term securities with
remaining maturities of sixty days or less at the time of purchase may be valued
at amortized cost, which approximates fair market value. Investments in other
open-end and closed-end regulated investment companies are valued at net asset
value.
B. REPURCHASE AGREEMENTS
It is the policy of the Funds to require a custodian bank to take possession, to
have legally segregated in the Federal Reserve Book Entry System, or to have
segregated within the custodian bank's vault, all securities held as collateral
under repurchase agreement transactions. Additionally, procedures have been
established by the Funds to monitor, on a daily basis, the market value of each
repurchase agreement's collateral to ensure that the value of collateral at
least equals the repurchase price to be paid under the repurchase agreement
transaction.
The Funds will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Funds' adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Funds could receive less
than the repurchase price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Net investment income other than
class specific expenses, and realized and unrealized gains and losses are
allocated daily to each class of shares based upon the relative net asset value
of outstanding shares (or the value of dividend-eligible shares, as appropriate)
of each class of shares at the beginning of the day (after adjusting for the
current day's capital share activity of the respective class). Distributions to
shareholders are recorded on the ex-dividend date.
D. FEDERAL TAXES
It is each Fund's policy to comply with the provisions of the Internal Revenue
Code, as amended (the "Code") applicable to regulated investment companies and
to distribute to shareholders each year substantially all of its income.
Accordingly, no provisions for federal taxes are necessary.
At November 30, 1998, the U.S. Government Income Fund and Strategic Income Fund
for federal tax purposes, had capital loss carryforwards, as noted below, which
will reduce the Funds' taxable income arising from future net realized gains on
investments, if any, to the extent permitted by the Code, and thus will reduce
the amount of the distributions to shareholders which would otherwise be
necessary to relieve the Funds of any liability for federal tax.
TOTAL TAX-LOSS
FUND CARRYFORWARD
- --------------------------------------------------------------------------------
U.S. Government Income Fund $451,531
Strategic Income Fund $2,632,285
- --------------------------------------------------------------------------------
Pursuant to the Code, the capital loss carryforward for the U.S. Government
Income Fund of $451,531 will expire in the year 2004 and the capital loss
carryforward for the Strategic Income Fund of $2,632,285 will expire in the year
2006.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Funds may engage in when-issued or delayed delivery transactions. The Funds
record when-issued securities on the trade date and maintain security positions
such that sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed delivery
basis are marked to market daily and begin earning interest on the settlement
date.
F. OPTION CONTRACTS WRITTEN
The Strategic Income Fund and U.S. Government Income Fund may write "covered"
call option contracts. The Strategic Income Fund may also write "covered" put
options. A written option obligates the Funds to deliver (a call), or to receive
(a put), the contract amount upon exercise by the holder of the option. The
principal reason for writing call or put options is to obtain, through receipt
of premiums, a greater current return than would be realized on underlying
securities alone. By writing call options, the Fund may forego potential gains
on the underlying security. By writing a put option, the Fund risks becoming
obligated to purchase the underlying security for more than its current market
price upon exercise. Premiums received from writing options are recorded as a
liability and an unrealized gain or loss is measured by the difference between
the current value and the premium received. For the six months ended
May 31, 1999, the U.S. Government Income Fund and Strategic Income Fund had net
realized gain (loss) on options contracts both written and purchased of
$(25,730) and $304,074, respectively.
The following is a summary of the U.S. Government Income Fund and Strategic
Income Fund written options activity:
U.S. GOVERNMENT
INCOME FUND
-----------------------------------
NUMBER OF
CONTRACTS PROCEEDS*<F18>
-----------------------------------
Outstanding at November 30, 1998 -- --
Contracts opened 250 $72,123
Contracts expired -- --
Contracts exercised 0 0
Contracts closed (250) (72,123)
-----------------------------------
Outstanding at May 31, 1999 -- --
-----------------------------------
STRATEGIC INCOME FUND
-----------------------------------
NUMBER OF
CONTRACTS PROCEEDS*<F18>
-----------------------------------
Outstanding at November 30, 1998 1,100 $147,161
Contracts opened 4,842 692,150
Contracts expired (1,800) (220,463)
Contracts exercised (528) (106,459)
Contracts closed (1,164) (229,658)
-----------------------------------
Outstanding at May 31, 1999 2,450 $282,731
-----------------------------------
*<F18>Represents premium received less commissions paid.
G. USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, revenues and expenses reported in the
financial statements. Actual results could differ from those estimated.
H. OTHER
Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
STELLAR TAX-FREE BOND FUND
--------------------------------------------
SIX MONTHS ENDED YEAR ENDED
A SHARES MAY 31, 1999 NOVEMBER 30, 1998
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------
Shares sold 1,768,792 3,500,206
Shares issued to shareholders in
payment of distributions declared 6,396 10,504
Shares redeemed (849,813) (1,545,029)
--------------------------------------------
Net change resulting from A Share transactions 925,375 1,965,681
--------------------------------------------
</TABLE>
<TABLE>
U.S. GOVERNMENT INCOME FUND
--------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1999 NOVEMBER 30, 1998
--------------------------------------------------
A SHARES SHARES DOLLARS SHARES DOLLARS
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Shares sold 3,217,652 $32,065,555 3,907,526 $39,183,622
Shares issued to shareholders in payment
of distributions declared 158,776 1,580,033 290,731 2,911,014
Shares redeemed (1,362,450) (13,584,876) (3,518,765) (35,148,883)
--------------------------------------------------
Net change resulting from A Share transactions 2,013,978 $20,060,712 679,492 $6,945,753
--------------------------------------------------
</TABLE>
<TABLE>
U.S. GOVERNMENT INCOME FUND
--------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
MAY 31, 1999 NOVEMBER 30, 1998*<F19>
--------------------------------------------------
B SHARES SHARES DOLLARS SHARES DOLLARS
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Shares sold 73,353 $729,695 40,004 $395,142
Shares issued to shareholders in
payment of distributions declared 1,288 12,756 630 6,378
Shares redeemed (2,125) (21,513) (10,675) (108,846)
--------------------------------------------------
Net change resulting from B Share transactions 72,516 $720,938 29,959 $292,674
--------------------------------------------------
Net change resulting from Fund Share transactions 2,086,494 $20,781,650 709,451 $7,238,427
--------------------------------------------------
--------------------------------------------------
*<F19> For the period from April 27, 1998 (date of initial public investment) to November 30, 1998.
</TABLE>
<TABLE>
STRATEGIC INCOME FUND
--------------------------------------------
SIX MONTHS ENDED YEAR ENDED
B SHARES MAY 31, 1999 NOVEMBER 30, 1998
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------
Shares sold 2,443,894 8,201,112
Shares issued to shareholders in payment of
distributions declared 227,293 509,914
Shares redeemed (2,862,552) (4,485,446)
--------------------------------------------
Net change resulting from B Share transactions (191,365) 4,225,580
--------------------------------------------
</TABLE>
(4) INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A. GENERAL
Certain officers of Firstar Bank, N.A. and Firstar Mutual Fund Services, LLC
serve as officers or Trustees of the Trust. Firstar Bank, N.A. and Firstar
Mutual Fund Services, LLC are related by virtue of each being a subsidiary of
Firstar Corporation.
B. INVESTMENT ADVISORY FEES
Firstar Bank, N.A., the Trust's investment adviser (the "Adviser"), receives for
its services an annual investment advisory fee based on a percentage of each
Fund's average daily net assets as follows:
FUND ANNUAL RATE
- --------------------------------------------------------------------------------
Stellar Tax-Free Bond Fund 0.75%
U.S. Government Income Fund 0.60%
Strategic Income Fund 0.95%
- --------------------------------------------------------------------------------
The Adviser may voluntarily choose to waive a portion of its fee. The Adviser
may modify or terminate this voluntary waiver of its advisory fees at any time
at its sole discretion.
C. ADMINISTRATIVE FEES
Firstar Mutual Fund Services, LLC ("Firstar") provides the Funds with certain
administrative personnel and services. Firstar receives a fee at an annual rate
of 0.11% of the average daily net assets of each Fund for the period.
D. DISTRIBUTION SERVICES FEES
Pursuant to the provisions of a distribution plan adopted in accordance with the
Investment Company Act Rule 12b-1 (the "Plan"), A Shares and B Shares of the
Trust may pay to the distributor of the Funds an amount computed at an annual
rate of 0.25% of the average daily net assets to finance any activity which is
principally intended to result in the sale of shares subject to the Plan.
Effective April 1, 1999, Edgewood Services, Inc. became the distributor of the
Funds. Prior to that date, B.C. Ziegler and Company served as the distributor of
the Funds.
The Stellar Tax-Free Bond Fund, U.S. Government Income Fund and Strategic Income
Fund will not accrue or pay any distribution expenses pursuant to the Plan until
a "Y" class of shares has been registered with the Securities and Exchange
Commission.
E. SHAREHOLDER SERVICES FEES
Under the terms of the Shareholder Services Agreement with Firstar Bank, N.A.,
each Fund may pay Firstar Bank, N.A. up to 0.25% of average daily net assets of
the Funds for the period. Prior to March 1, 1999, Firstar Bank, N.A. limited the
Shareholder Servicing fee to 0.05% of average daily net assets. As of March 1,
1999, the Shareholder Servicing fee was changed to 0.10% of average daily net
assets. The fee paid to Firstar Bank, N.A. is used to finance certain services
for shareholders and to maintain shareholder accounts. Firstar Bank, N.A. can
modify or terminate this limitation at any time at its sole discretion.
F. TRANSFER AND DIVIDEND DISBURSING AGENT FEES
Firstar Bank, N.A. serves as transfer and dividend disbursing agent for the
Funds. The fee paid to Firstar Bank, N.A. is based on the size, type and number
of accounts and transactions made by shareholders.
G. PORTFOLIO ACCOUNTING FEES
Firstar is the Funds' accounting services agent. Firstar is responsible for
maintaining the Funds' accounting records for which it receives a fee. The fee
is based on the level of each Fund's average daily net assets for the period,
subject to an annual minimum of $39,000 per Fund, plus out-of-pocket expenses.
H. CUSTODIAN FEES
Firstar Bank, N.A. is the Funds' custodian for which it receives a fee. The fee
is based on the level of each Fund's average daily net assets for the period,
plus out-of-pocket expenses.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the six
months ended May 31, 1999, were as follows:
PURCHASES SALES
- --------------------------------------------------------------------------------
Stellar Tax-Free Bond Fund $25,073,936 $13,707,630
U.S. Government Income Fund 113,701,676 93,331,066
Strategic Income Fund 77,199,977 77,960,238
- --------------------------------------------------------------------------------
<TABLE>
NET UNREALIZED GROSS GROSS
COST OF APPRECIATION UNREALIZED UNREALIZED
INVESTMENTS (DEPRECIATION) APPRECIATION DEPRECIATION
FOR FEDERAL FOR FEDERAL FOR FEDERAL FOR FEDERAL
FIRSTAR STELLAR FUNDS TAX PURPOSES TAX PURPOSES TAX PURPOSES TAX PURPOSES
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Stellar Tax-Free Bond Fund $153,611,815 $6,375,949 $6,610,623 $234,674
U.S. Government Income Fund 163,786,054 (2,581,228) 1,853,917 4,435,145
Strategic Income Fund 200,235,565 (10,265,503) 1,737,547 12,003,050
- -----------------------------------------------------------------------------------------------
</TABLE>
TRUSTEES OFFICERS
Thomas L. Conlan Jr. Daniel B. Benhase
PRESIDENT
Dr. Alfred Gottschalk Joseph C. Neuberger
VICE PRESIDENT
Dr. Robert J. Hill Michael T. Karbouski
TREASURER
Dawn M. Hornback Elaine E. Richards
SECRETARY
Lawrence M. Turner
William H. Zimmer III
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government or the Federal
Deposit Insurance Corporation. Investment in mutual funds involves investment
risks, including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Trust's prospectus which contains facts
concerning its objectives and policies, management fees, expenses and other
information.
Firstar Stellar Funds are available through:
o the Firstar Funds Center,
o Investment Specialists who are either registered
representatives of Firstar Investment Services, Inc.,
a registered broker/dealer, NASD and SIPC member,
or registered representatives of MDS Securities,
a division of Conseco Financial Services, Inc.,
a registered broker/dealer, NASD and SIPC member,
o and through selected shareholder organizations.
This report is authorized for distribution only when preceded or
accompanied by a current prospectus.
For Account Balance and Investor Services Information
1-800-677-FUND
1-414-287-3808
Firstar Stellar Funds
615 East Michigan Street
P.O. Box 701
Milwaukee, WI 53201-0701
www.firstarstellarfunds.com
(FIRSTAR STELLAR FUNDS LOGO)
Form #SFBFSEM-99
